finn
The net asset value is calculated as
(Current market value of portfolio − Liabilities)/Number of shares outstanding.
The average upfront sales charge for the purchase of a no-load mutual fund is
0%
An employer may choose to match the contribution made by employees in a
401(k) plan or a salary-reduction plan.
A salary-reduction plan is also known as a
401(k) plan.
Which of the following is NOT a factor that affects the price a company charges for a life insurance policy?
All of these affect the price.
A call feature
Allows the corporation to buy outstanding bonds from current bondholders before the maturity date
Which of the following is not a major source of retirement income?
Annuity. Employer pension plan. Personal retirement plan. Public pension plan.
An example of a lifecycle fund is a fund that
Assists investors with planning for retirement by a specific date.
The potential return on any investment should
Be directly related to the risk the investor assumes.
A person who is named to receive the proceeds from a life insurance policy is a(n)
Beneficiary.
When you sell your shares in a mutual fund, you may receive a profit that results from an increase in value called
Capital gain.
Which type of fund has the prices determined by factors of supply and demand like the prices of a stock?
Closed-end fund
Equity financing is money received from the sale of
Common stock.
Which of the following is NOT a type of permanent life insurance?
Decreasing term
All of the following are examples of defined contribution plans except
Defined-benefit plan.
Which retirement plan specifies the benefits you'll receive at retirement age based on your total earning and years on the job?
Defined-benefit plan.
Which of the following are major reasons that investors purchase mutual funds
Diversification and professional management.
This calculation uses the current price per share and the annual amount of money paid to investors from the company.
Dividend yield
A distribution of money, stock, or other property that is paid to the stockholders of a company is called a
Dividend.
A fancy way of saying you need to diversify your investments is
Don't put all of your eggs in one basket.
Donald and Charlene are married and do not have any children. They plan to ensure that the other will not be unduly burdened by debts in case one of them dies. Each plans to continue to work after the other one dies. Which method are they using to determine their life insurance needs?
Dual income, no kids method
Which of the following is a profitability ratio that uses the number of outstanding shares in the calculation?
Earnings per share
Which of the following is based on historical numbers?
Earnings per share and Price-earnings ratio.
Vesting is the right to receive the
Employer's contributions to a pension plan even if the employee leaves the company before retiring.
Which of the following is a fund that invests in the stocks or securities contained in a specific stock or securities index?
Exchange-traded fund
Francisco and Maria have three children and want to complete a detailed worksheet to determine the amount of life insurance they need to purchase. They will consider factors such as Social Security and liquid assets. Which method are they using to determine their life insurance needs?
Family need method
Which of the following types of stock funds invests in stock issued by companies expecting higher-than-average revenue and earnings growth?
Growth funds
When you retire, you will probably spend more money on
Health insurance.
Which of the following households most likely has the greatest need for life insurance?
Household with children.
When conducting a financial analysis for retirement planning, you should review
Housing. Life insurance. Other Investments. Assets.
Which of the following statements about stock splits is correct?
If a company has a 4-for-1 split, the new number of shares will be four times as many as before the split.
Which of the following annuities is purchased with a lump-sum payment and allows an individual to receive income payments beginning now?
Immediate annuity
Fred bought life insurance five years ago. He forgot to tell them that he had a heart condition, and, as a result of that condition, he recently died. Which of the following provisions prevents the life insurance company from refusing to pay his beneficiaries because of his original fraudulent misrepresentation?
Incontestability clause
A discounted security means that the actual purchase price is
Less than the maturity value.
Many mutual funds charge a commission every time shares are purchased by investors. These are called
Load funds.
Sally wants to invest in a fund that invests only in stock. Which of the following will meet her needs?
Midcap funds
When an employer promises to set aside a certain amount of money for each employee each year, it has set up a
Money-purchase plan.
Wendy has had a life insurance policy for five years with her spouse listed as the person who receives the benefit if she dies. She was recently divorced. Which of the following provisions should she take action on?
Naming a beneficiary
Jeff and Erica have two children. They plan to purchase life insurance using this formula: (18 minus Youngest child's age) × $10,000. Which method are they using to determine their life insurance needs?
Nonworking spouse method
Whose shares are issued and redeemed by the investment company at the request of investors?
Open-end fund
You want to purchase a life insurance policy that pays a policy dividend. What kind of policy would you want to purchase?
Participating policy
An employer's contribution will vary according to the company's profits in a
Profit-sharing plan.
Most people buy life insurance to
Protect the people who depend on the insured from financial losses caused by his or her death.
Which of the following types of stock funds invest in stock traded within one specific region of the world?
Regional funds
A bond that is repaid from the income generated by the project it is designed to finance is called a(n)
Revenue bond.
Which of the following would be considered a safe investment?
Savings accounts
When planning for retirement, inflation
Should be considered since income received earlier in retirement will buy more than the same amount received later in retirement due to the rising prices of goods and services.
Generally, interest on corporate bonds is normally paid every
Six months.
A security issued by the U.S. government where the principal increases with inflation and decreases with deflation is called a
TIPS.
Interest paid to corporate bond owners is
Tax-deductible for the corporation.
When analyzing a price-earnings ratio,
The higher the price-earnings ratio, the more investors are paying for earnings.
Which of the following is correct for a closed-end fund?
The price of its shares is determined by supply and demand, by the value of stocks in the portfolio, and by investor expectations.
Which of the following is correct?
The price/earnings ratio is the price of a share of stock divided by the corporation's earnings per share of stock.
When thinking about retirement, which of the following is correct?
The sooner you start saving, the better.
Why does a company split its stock?
The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range
Which of the following is not correct regarding preferred stock?
The yield on preferred stocks is often lower than the yield on corporate bonds.
A U.S. government security issued in minimum units of $100 with 4, 13, 26, or 52-week maturities is called a
Treasury bill.
When comparing the interest rates for U.S. government securities, which of the following is correct?
Treasury bills < Treasury notes < Treasury bonds
Which of the following is not a U.S. Treasury security?
Treasury stock
Which of the following allows an individual to receive an amount of income that will change based on the income received from stocks or other investments over a certain period of time, or over his or her life?
Variable annuity
Another name for permanent life insurance is
Whole life.
If you have a multiyear level term policy,
Your premium will be the same for the duration of your policy.
When you retire, you will probably spend less money on
clothing
A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.
convertible
This life insurance is used to pay off certain debts, such as auto loans, in the event that you die before the debts are paid in full. Which of the following is not the best buy for the amount of protection offered for an individual?
credit life
A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.
debenture
Judy and James have a 4-year-old child. They plan to purchase life insurance using this formula: Current income × 7 × 70%. Which method are they using to determine their life insurance needs?
easy method
According to the suicide clause, the beneficiaries of someone who dies by suicide will never be eligible to receive any benefits from his or her life insurance policy.
false
An example of an investment with high risk is a government bond.
false
Annuities are more attractive for people who expect to live only a short time.
false
Asset allocation is the process of spreading your assets among several different types of investments to increase risk.
false
Companies need to repay money from equity financing.
false
If you switch life insurance policies, you will automatically still be insurable.
false
In the event of bankruptcy, stockholders have a claim to assets of the corporation before bondholders.
false
Life insurance is a wise purchase for all individuals.
false
Municipal bonds generally are only tax-exempt at the federal level.
false
Mutual life insurance companies specialize in the sale of nonparticipating policies.
false
Stocks are guaranteed to have large returns.
false
The sooner a person is likely to die, the lower the premiums he or she will pay.
false
To investors, liquidity means their investments will increase in value.
false
According to the text, which of the following will probably be your most valuable asset at retirement?
house
A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.
mortgage
A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n) ____________ fund.
sinking
Which of the following is NOT a type of permanent insurance?
term life
A limited payment policy is a type of whole life policy that requires premiums to be paid for a certain length of time, usually 20 or 30 years
true
An interest-adjusted index is a method of evaluating the cost of life insurance by taking into account the time value of money.
true
Another name for a straight term policy is multiyear level term.
true
Bond ratings range from AAA (the highest) to D (the lowest) for Standard & Poor's Corporation.
true
Corporate earnings are reported in the firm's annual report, or are obtained from a professional advisory service or accessing a website such as Yahoo! Finance.
true
Decreasing term insurance pays less to the beneficiary as time passes.
true
Life insurance benefits may be used to pay off a home mortgage or other debts at the time of death.
true
Premium payments are fixed with a variable life policy.
true
The "family need" method of estimating life insurance includes factors such as Social Security and liquid assets
true
The potential return on any investment should be directly related to the risk that the investor assumes.
true
The usual face value of a corporate bond is $1,000.
true
When companies experience a bad year regarding earnings, they may choose to reduce or omit their dividend payments.
true
When you buy life insurance, you are making a contract with the company issuing the policy where you agree to pay a premium periodically and the company agrees to pay a death benefit.
true
Whether you are making your own decisions or have professional help, you must consider the tax consequences of selling your investments.
true
in the event of bankruptcy, bondholders have a claim to assets of the corporation before stockholders.
true
Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?
variable life
